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Marketable Cash Value

12.22.1995

The type of value commonly used in divorce settlements is “marketable cash value.” Unlike fair market value, which should be used only in IRS situations, (estate tax appraisals, donations appraisals and gift tax appraisals), marketable cash value represents the amount of money one would receive from the sale of a work of art, net of all expenses connected with the sale. These expenses may include the buyer’s premium, which a purchaser may have to pay to an auction house; the seller’s commission, due to an auction house or art dealer; cataloguing expenses, photography; transportation costs; advertising and promotion, insurance premiums, at al.

Fair market value, on the other hand, represents the gross value received from a sale which would include all these expenses. For Example, the purchaser of a painting at auction may pay $110,000, including, the buyer’s premium, for the work or art, while the seller, after expenses have been deducted, may only receive $88,000 would represent the painting’s marketable cash value and this would be the value userd in the appraisals written for equitable distribution purposes.

Using this illustration, it is understandable why marketable cash value would be the preferred type of valuation in a divorce settlement where a couple’s assets must be divided equally and fairly between the two parties,

For example, a husband and wife, during the course of a twenty year marriage, may have accumulated many assets among which may be, cash in the bank, stocks and bonds, real estate and an art collection of Picassos and sacrifice $1,000,000 in cash for this privilege. However, if, shortly after the divorce, she comes to the realization that she now hates the Picasso collection because “it reminds me of him” she should have knowledge and security, rendered, through a properly prepared appraisal, that she will actually receive $1,000,000, and not $700,000, should she now wish to sell the collection.

Under such circumstances, marketable cash value, and not the more abstract IRS term, fair market value, should be used as the basis for the valuation. Otherwise, the distribution of assets, agreed upon in the court proceedings would not be equitable’ and, by extension, a appraiser who has not used marketable cash value for an equitable distribution appraisal may be vulnerable in any cross examination during the divorce proceedings or in legal action for negligence which may arise at a later date.

This article is from Marketable Cash Value One of the Elements of a Correctly Prepared Appraisal, and was written by Victor Wiener.